SANGAMNER BHAG SAHAKARI KARKHANA LTD. versus MIS. KRUPP INDUSTRIES LTD.

Citation: [2002] 3 S.C.R. 875 · Decided: 07-05-2002 · Supreme Court of India · Bench: R.C. LAHOTI · Disposal: Disposed off

Judgment (excerpt)

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SANGAMNER BHAG SAHAKARI KARKHANA LTD. 
A 
v. 
MIS. KRUPP INDUSTRIES LTD. 
MAY7,2002 
[R.C. LAHOTI AND B.N. AGRA WAL, JJ.] 
B 
Arbitration Act, 1940-Sections 2(a) and 16(/)-Arbitration 
agreement-Dispute-Arbitration clause-Reference-Scope of-Dispute 
arising out of contract between the parties, arbitrators seized of the dispute, C 
parties joining in contest before arbitrator. arbitrator passing an awCzrd-
Civil Judge remilling the award to arbitrator-However, High Court setting 
aside remission order holding award beyond jurisdiction of arbitrator-On 
facts, held, such award within the scope of reference to an arbitrator-
Remission of award by the Court in exercise of discretion correct. 
Appellant-co--0perative sugar factory entered into an agreement with 
respondent for design, manufacture, procurement and supply of machinery and 
equipments. Disputes arose between the parties which were referred for 
arbitration. Arbitrators passed an award directing Rs. 151.97 lacs to be paid 
D 
by the respondent to the appellant. Award was filed in the Court. Parties filed E 
objections against the award. Civil Judge directed the award to be remitted 
back to the arbitrators for rendering a fresh award. Appellant filed a revision 
challenging remittance of the award while the respondent filed appeal 
submitting that the award should have been set aside and there was no occasion 
for remitting the award to the arbitrators. Single Judge of High Court set 
aside the remittance of the award to the arbitrators and also the award to the F 
extent of Rs. I 07.54 Lacs with interest since it was beyond the scope of 
reference to the arbitrator. However, rest of the award was made rule of the 
Court. Hence the present appeals. 
Disposing of the appeals, the Court 
G 
HELD: It is the substance of the claim made before arbitrators which 
has to be seen. Court would not construe the nature of claim by adopting too 
technical an approach or by indulging into hair-splitting. Else the whole 
purpose behind holding arbitration proceedings as an alternate to civil court's 
forum would stand defeated. The arbitration clause and the disputes referred H 
875 
876 
SUPREME COURT REPORTS 
(2002] 3 S.C.R. 
A and adjudicated upon by the arbitrators have been perused carefully. It is 
difficult to sustain the finding of the High Court that the arbitrators had 
determined an issue which was beyond the scope of reference to the arbitration. 
The disputes did arise out of the contract between the parties and the 
arbitrators were seized of the disputes within the scope of reference to them. 
B The parties have also joined in the contest before the arbitrators having 
understood the scope of controversy. No fault can be found with the discretion 
exercised by the Civil Judge, Senior Division, High Court has erroneously 
formed an opinion that part of the award was beyond the jurisdiction of the 
arbitrators. Thus, the order of High Court is set aside and that of the Civil 
Judge is restored. The award shall stand remitted to the arbitrators in the 
C terms as directed by the Civil Judge. (879-G, H; 880-A, B; D-F) 
Renusagar Power Co. ltd. v. General Electric Company and Anr., (1984) 
4 SCC 679 and Ramachandra Reddy and Co. v. State of A. P. and Ors., ( 200 I) 
4 sec 241, referred to. 
0 
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 3365-66 of 
2002. 
From the Judgment and Order dated 20.10.2000 of the Mumbai High 
Court in C.R.A. No. 801 of2000 with Appeal from Order No. 50 of2000. 
E 
R.F. Nariman, R.N. Dhorde, P.R. Malpani, S.K. Verma and Shivaji 
F 
M. Jadhav for the Appellant. 
P.M. Amin, Ketan Parikh, Atul Desai, Pratap Venugopal, P.S. Sudhir and 
K.J. John for the Respondent. 
The Judgment of the Court was delivered by 
R.C. LAHOTI, J. Leave granted in both petitions. 
The appellant is a co-operative sugar factory manufacturing sugar from 
sugarcane. On 17 .11.1992 an agreement was entered into between the appellant 
G and the respondent for design, manufacture, procurement and supply of 
machinery and equipments for moderanisation with continuous fermentation 
process based on "Encillium Process", developed and patented by Council 
... 
for Scientific. and Industrial Research, New Delhi and National Chemical 
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Laboratory, Pune. Disputes arose between the parties. The agreement dated 
H 17 .11.1992 contained an arbitration clause pursuant whereto the disputes were 
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SANGAMNER BHAG SAHAKARI KARKHANA 1'. KRUPP INDUSTRIES LTD. [R.C. LAHO

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